DeWolfe quitting could help reinvent MySpace

Social network could challenge Facebook's popularity

MySpace CEO Chris DeWolfe stepping down could be the perfect time for the social network to reinvent itself in a bid to challenge rival network Facebook, say analysts.

News Corp, which bought the social networking site in 2005, announced this week that co-founder DeWolfe, by "mutual agreement", will not renew his contract and will be stepping down as CEO in the "near future." He will continue to serve on the board of MySpace China and will be a strategic advisor to the company, News Corp said.

MySpace has been on the slide in recent years, letting Facebook significantly eclipse it in terms of market and mindshare. Online researcher ComScore said that MySpace, the pioneer of the social networking phenomenon, had been overshadowed as Facebook recorded almost double the number of global visitors in December last year MySpace.

In February, Facebook's audience of people over the ripe old age of 35 increased by 23 percent compared to a year-earlier, says Hitwise, which measures online traffic. While Facebook was first created to serve college students, the network over the past year or so has broadly expanded its audience.

At the same time, though, Hitwise said that MySpace has been unable to expand its base beyond teenagers. In fact, the number of MySpace users over the age of 35 dropped 2 percent from February 2008 compared to the same month this year.

"It is the classic sports metaphor; when the team does not perform, the manager is fired," said Ezra Gottheil, an analyst at Technology Business Research.

"It is not that MySpace did anything wrong, but its initial positioning prevented it from moving into the somewhat older, notionally more mature Facebook demographic. What is more, Facebook is the flavor of the year. It has momentum."

Dan Olds, principle analyst at the Gabriel Consulting Group, said there's been some issues between the MySpace founders and News Corp, but this change could be what MySpace needs to reinvigorate itself and gain some much-needed momentum.

"It didn't help that Facebook has moved quickly to leader in the social networking race to overtake MySpace," said Olds.

"This really shouldn't be a surprise to anyone. The founders' contracts were due to expire later this year anyway, and seemed clear that they were not going to be renewed. So it probably makes it easier on everyone to make the transition to new management sooner rather than later.This will make it easier for the company to shake things up and hopefully regain their mojo... This gives them a chance to change things around and get out their rut. Kind of like Yahoo bringing in new blood with Carol Bartz."

Caroline Dangson, social media research analyst at IDC, pointed out that MySpace generated nearly four times the advertising revenue that Facebook did last year.

"Of course, a big part of the revenue was from guaranteed payments from Google, which has run search and contextual ads on MySpace since 2006," she added.

"The MySpace/Google deal expires in eight months, which has to be adding even more pressure to the situation."

Dangson also said that the change in command at MySpace signals a move to change the company's strategy and culture.

"Any major shake up at a company is always opportunity to realign and reinvent," she said. "It also means time spent realigning and reinventing - a distraction from external initiatives to gain market share from Facebook."